Opinion
No. 04 Civ. 3105 (JSR).
January 15, 2005
MEMORANDUM ORDER
On October 8, 2004, the Court granted defendant's motion for summary judgment and denied plaintiff's cross motion for summary judgment as moot. See Order, 10/8/04. This opinion briefly sets forth the reasons for that determination and directs the entry of final judgment.
There is no dispute about the relevant facts. One Sayeda Hanson brought two suits in New York state court for injuries she suffered while working at a restaurant/bar operated by Gaming Restaurants, Inc. ("Gaming") at premises leased to the New York City Off-Track Betting Corp. ("OTB"). OTB's insurers, Twin City Fire Insurance Company and Zurich American Insurance Company, successfully defended the suits and then, by bringing the present action, sought to recover a share of the defense costs from Wausau Business Insurance Company ("Wausau"), which, as part of a policy written for a restaurant management company, insured certain "additional named insureds" (including Gaming) "with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to [the additional named insured]. . . ." Affidavit of Richard DiNicola sworn to Aug. 27, 2004 ("DiNicola Aff."), Exs. 8 9 (Wausau Policies).
Gaming operated the restaurant/bar in question pursuant to an agreement with OTB entitled "Concession Agreement/Not A Lease." DiNicola Aff., Ex. 6 (Concession Agreement), Art. 1. That agreement provides that: "It is expressly understood that no land, building, space, improvement, or equipment is leased to Concessionaire." Id. The agreement further provides that OTB has the "absolute right to enter the Concessionaire Area, at any time, for the purpose of conducting the business of the OTB," id. at Art. 14, that Gaming may only operate the restaurant when OTB's Teletheater is open to the public, except with written approval by OTB, id. at Art. 4, that Gaming may not assign its right to operate the bar/restaurant without OTB's approval, except to another restaurant owned by the restaurant management company, id. at Art. 8, that OTB may terminate the agreement without cause on six months' notice, id. at Art. 22, and that Gaming, rather than providing its own equipment, must utilize the "restaurant equipment and furniture provided by OTB in the Concessionaire area," id. at Art. 15. Finally, the agreement required Gaming to obtain various insurance policies naming OTB as an additional insured. Id. at Art. 11.
Hanson's injury was allegedly caused by equipment installed by OTB. See DiNicola Aff., Ex. 7 (Deposition of Frank Scarfuto) at 22-23.
It seems self-evident, then, that Gaming's agreement with OTB was not a lease and that, accordingly, Wausau has no liability since its coverage expressly extended only to events occurring on premises "leased" to Gaming. Plaintiffs nonetheless contend that New York law, which here governs, somehow treats Gaming's non-lease as a lease for insurance purposes or at least creates a jury question as to same. For this remarkable proposition they claim to find support in ZKZ Assocs. LP v. CNA Ins. Co., 224 A.D.2d 174 (1st Dep't 1996), aff'd, 89 N.Y.2d 990 (1997).
In ZKZ, plaintiff owned a garage managed by defendant's insured. Although the management contract required defendant's insured to obtain insurance that named plaintiff as an additional insured, the insurance policy that was actually purchased insured plaintiff only for events occurring on premises "leased" to defendant's insured. The New York court nonetheless concluded that the scope of the policy should not be read literally "but rather in operational terms covering the extent of control over the premises that the management agreement vested in" defendant's insured. Id. at 175. In briefly affirming, the Court of Appeals noted that holding otherwise would "render the extra coverage [that plaintiff had] purchased nugatory." 89 N.Y.2d at 991.
ZKZ, however, has no applicability to the present case. To begin with, the Wausau policy here in issue, unlike the one in ZKZ, was not negotiated to cover the specific situation of Gaming, but rather was a policy obtained by a restaurant management company to cover numerous restaurant operations, some of which leased their premises. Thus, excluding coverage in the case of Gaming would in no way render the policy nugatory or otherwise yield absurd results. Cf. Jefferson Ins. Co. of N.Y. v. Travelers, 681 N.Y.S.2d 208, 212 (1998) (citing ZKZ for proposition that "courts cannot read policy provisions to be meaningless"). Furthermore, here, in contrast with ZKZ, Gaming does not have the "complete responsibility for operating and managing the facility" that would justify a finding that it holds the constructive equivalent of a lease. Indeed, because Gaming was only allowed to use the equipment and furniture provided by OTB, it did not have sufficient control over the facility to have prevented the alleged liability that was the basis of the underlying lawsuit. No insurance company would voluntary issue a policy requiring it to pay out for liabilities incurred by third parties not under the control of the policyholder (at least not without dramatic increases in its standard premiums), and plaintiff has cited no cases imposing such terms on an insurer involuntarily.
Although at oral argument, plaintiff's counsel claimed that his examination of the insurance policy in ZKZ suggested that it had not, in fact, been written specifically to cover the management agreement at issue there since ZKZ was never specifically named in the policy, this is inaccurate, since an examination of the policy reveals that ZKZ was indeed expressly named as the sole additional insured.
Since the Wausau policy must therefore be construed, as a matter of law, not to provide coverage to Gaming in the instant situation, defendant's motion for summary judgment must be granted and plaintiff's cross motion for summary judgment denied.
Accordingly, the Clerk of the Court is directed to enter final judgment in favor of defendant.
SO ORDERED.